As Published in Mid Atlantic Dealer Magazine (Pages 16-17)

With dealers under increasingly enormous pressure to control costs and maintain liquidity in the current economic environment, advertising budgets often appear to be a dispensable luxury in the struggle to survive.  Principals and General Managers who succumb to that temptation, however, put the long-term future of their dealerships at risk, according to Wharton and advertising experts.

The first reaction is to cut, cut, cut, and advertising is sadly one of the first things to get cut. As companies slash advertising in a downturn, they leave space in consumers’ minds for more aggressive marketers to make strong inroads into market share. Today’s economy provides a unique opportunity to differentiate yourself and stand out from the crowded dealer space. But it takes a lot of courage and convincing to get most management teams on board with this kind of forward thinking.

Keep in mind that when the demand for advertising services pulls back, the cost of these multitudes of mediums goes down, making advertising expenditures even more defensible in a bad business climate. All dealerships should have something to say that is completely relevant in today’s environment or any for that matter. It is going to be more efficient to say it now than it was to say it in the more lucrative times.

History shows that dealers that consistently advertise even during recessions perform better in the long run. A McGraw-Hill Research study that looked at 600 dealerships from 1980 to 1985 found that those dealers who chose to maintain or raise their level of advertising expenditures during the 1981 and 1982 recession had significantly higher sales after the economy recovered. Specifically, those who advertised aggressively during the recession had 256% higher sales than those that did not continue to advertise.

For dealerships that do stay the course and continue to advertise during noticeable downturns or increase their promotional activities, the key is to craft marketing messages that reflect the times and describe how their vehicles or services still benefit the consumer, especially during these more difficult times. For example, dealers might be tempted to emphasize price in a recession, but that only works for mega deep-pocket dealers that are built around a core strategy of providing the lowest prices focused on volume over gross. They are counting on expanding their market share with only price.

Smaller independent dealers in a downturn must rally to protect and preserve their unique brand equity that has been nurtured for years, with continued investment in and support of a dealer’s brands, products, and services. The worst thing you can do is cheap out on delivering your normal services and the value they have come to enjoy. In other words, you can’t put less coffee in the cappuccino and not expect your customers to take notice, as many have in the past. Make it a point that customers can trust your brand even more during difficult times.

While price is important in any market especially a recession, the majority of price-driven consumers still factor in the importance of branding. Clear brand association and leadership come through communication. If dealers cut the communication (which is advertising), they will have a serious long-term problem.

Dealers must make sure they understand the “elasticity” of their dealership or brand, which would be a gauge of how much — or how little — advertising is necessary to sustain sales. It is not a science. There is a lot of competing messaging out there, but the reality is to be successful dealers must stay hyper-focused focused support their dealership and sales.

Also, dealers should heed caution knowing that in today’s networked, digital marketplace, consumer buzz about disappointments with a product can metastasize quickly and widely. We must give people good things to talk about by continuing to have good products and communication. If they are struggling to afford gas, help them solve that problem and they will sing praises. Ignore their issues and they will cost you double or triple the amount. The biggest lesson is that recessions come and go, but hopefully, your dealer brand is for life.  So be careful how you react because history reminds us that this downturn is not going to be forever.

If dealers cut deeply into advertising and communications in a down period, the cost to regain a share of voice in the market once the economy turns around may cost four or five times as much as the cuts saved.  Dealers must keep a balance in times like this. DO NOT go dark when customers and consumers need you, because they need you as much now as you need them.

A downturn is a natural time to focus on core strategies and find ways to help communicate your dealership’s ability to solve its customer's economic transportation concerns. Downturns can be a huge opportunity that is only disguised as a problem.  The dealer help must position their brand as an ally to consumers in tough times with vehicles and service development or sponsorship programs that meet their wants and needs. With this approach, consumers will better see by your actions that your dealer’s brand is on their side.  This laser-focused approach will pay dividends not only during a recession but far beyond when the market comes back, and everyone is spending double or triple to catch up.

Advertisers in all categories must be in tune with consumers in the current climate. They need to fine-tune messaging to be sensitive. In challenging times, marketers must also work harder to segment consumers with specific messages. If, in the past, you used mass media, you probably want to be more targeted now to make sure the message gets to the right people with the right message.  Dynamic Digital Marketing helps to make this happen. Meet them where they are and they will show up in droves.

Research indicates that combative advertising which targets competitors escalates during an economic downturn. When the marketplace is shrinking, you tend to become a little more competitive in your tone.  We advise caution as this approach can backfire. If you say your competitor is bad and your competitor says you are bad, ultimately the customer thinks both are probably good and bad. In other words, never give the consumer a reason to shop your competition. By and large, consumers tend to be indifferent and truly desire brands that help solve their buying concerns. Even more so in a downturn, if you want to create loyal customers, you do not want to be overly competitive.  It is so much better to highlight what you do best and be sensitive to the needs of your customers rather than bashing the competition.

An economic slump may be a time to reconfigure the advertising mix heavily to strong digital marketing outlets that can target with precision, depending on the product, brand positioning, and overall dealer strategy.  Dealers do not have to put a huge amount of money in the marketplace.  The lower-cost digital marketing techniques such as banners, remarketing, retargeting and so much more might merit new attention. Now might be the time to try new digital mediums that you have been on the sidelines wondering. TikTok, Meta Reels, and so much more can deliver powerful messaging. When times are flush, it is easy to pay a premium for more expensive established media. Instead stay focused, and determined and seek how your dealership can best stay the course during economic downturns and then be way ahead of the competition when the economy fully returns.

Yes, all forms of advertising can be successful even in a recession, although the impact of digital marketing might be easier to quantify and therefore able to withstand the scrutiny of demanding justification for any spending while dealer principals and management teams are under recessionary pressures. Consumers are looking for hope or a beacon of light during difficult times, steer into their desires and they will reward you in ways unthinkable.

The current economic times will offer an opportunity for dealers to provide integrated campaigns meshing a digital marketing full-court press.  In more recent downturns, 2001 & 2007, digital marketers were operating out of separate agencies, but today dealers can construct fully integrated budget-conscious digital advertising and marketing campaigns. We all have been talking about integration for years, but it has been a much slower process than we expected.  Yes, the coming economic-driven downturn will accelerate that integration, but those who are the most well-integrated and refuse to take complete shelter will start to see some of the biggest benefits.

-Terry MacCauley, CEO